October 18-20 | Tucson, AZ

The Research Institution GAP Fund and Accelerator Program Summit

Building Commercialization Capacity in Innovation Ecosystems

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October 18-20, 2023 / Tucson, AZ
The annual summit for research institution gap fund and accelerator programs, including proof of concept programs, startup accelerators, and university venture funds

The Story

Just like crop tops, flannel, and some truly unfortunate JNCO jeans that one of these authors wore in junior high, the trends of the 90’s are upon us again. In the innovation world, this means an outsized focus on tech-based economic development, the hottest new idea in economic development, circa 1995. This takes us back in time to fifteen years after the passage of the Bayh Dole Act, the federal legislation that granted ownership of federally funded research to universities. It was a time when the economy was expanding, dot-com growth was a boom, not a bubble, and we spent more time watching Saved by the Bell than thinking about economic impact.

After the creation of tech transfer offices across the country and the benefit of time, universities were just starting to understand how much the changes wrought by Bayh-Dole would impact them (or not). A raft of optimistic investments in venture development organizations and state public-private partnerships swept the country, some of which (like Ben Franklin Technology Partners and BioSTL) are still with us today, and some of which (like the Kansas Technology Enterprise Center) have flamed out in spectacular fashion. All of a sudden, research seemed like a process to be harnessed for economic impact. Out of this era came the focus on “technology commercialization” that has captured the economic development imagination to this day.

Commercialization, in the context of this piece, describes the process through which universities (or national labs) and the private sector collaborate to bring to the market technologies that were developed using federal funding. Unlike sponsored research and development, in which industry engages with universities from the beginning to fund and set a research agenda, commercialization brings in the private sector after the technology has been conceptualized. Successful commercialization efforts have now grown across the country, and we believe they can be described by four practical principles:

  • Principle 1: A strong research enterprise is a necessary precondition to building a strong commercialization pipeline.
  • Principle 2: Commercialization via established businesses creates different economic impacts than commercialization via startups; each pathway requires fundamentally different support.
  • Principle 3: Local context matters; what works in Boston won’t necessarily work in Birmingham.
  • Principle 4: Successful commercialization pipelines include interventions at the individual, institutional, and ecosystem level.

Principle 1: A Strong Research Enterprise Is A Necessary Precondition To Building A Strong Commercialization Pipeline.

The first condition necessary to developing a commercialization pipeline is a reasonably advanced research enterprise. While not every region in the U.S. has access to a top-tier research university, there are pockets of excellent research at most major U.S. R1 and R2 institutions. However, because there is natural attrition at each stage of the commercialization process (much like the startup process) a critical mass of novel, leading, and relevant research activity must exist in a given University. If that bar is assumed to be the ability to attract $10 million in research funding (the equivalent of winning 20-25 SBIR Phase 1 grants annually), that limits the number of schools that can run a fruitful commercialization pipeline to approximately 350 institutions, based on data from the NSF NCSES. A metro area should have at least one research institution that meets this bar in order to secure federal funding for the development of lab-to-market programs, though given the co-location of many universities, it is possible for some metro areas to have several such research institutions or none at all.

Principle 2: Commercialization Via Established Businesses Creates Different Economic Impacts Than Commercialization Via Startups; Each Pathway Requires Fundamentally Different Support.

When talking about commercialization, it is also important to differentiate between whether a new technology is brought to market by a large, incumbent company or start-up. The first half of the commercialization process is the same for both: technology is transferred out of universities, national labs, and other research institutions through the process of registering, patenting, and licensing new intellectual property (IP). Once licensed, though, the commercialization pathway branches into two.

With an incumbent company, whether or not it successfully brings new technology to the market is largely dependent on the company’s internal goals and willingness to commit resources to commercializing that IP. Often, incumbent companies will license patents as a defensive strategy in order to prevent competition with their existing product lines. As a result, license of a technology by an incumbent company cannot be assumed to represent a guarantee of commercial use or value creation.

The alternative pathway is for universities to license their IP to start-ups, which may be spun out of university labs. Though success is not guaranteed, licensing to these new companies is where new programs and better policies can actually make an impact. Start-ups are dependent upon successful commercialization and require a lot of support to do so. Policies and programs that help meet their core needs can play a significant role in whether or not a start-up succeeds. These core needs include independent space for demonstrating and scaling their product, capital for that work and commercialization activities (e.g. scouting customers and conducting sales), and support through mentorship programs, accelerators, and in-kind help navigating regulatory processes (especially in deep tech fields).

Principle 3: Local Context Matters; What Works In Boston Won’t Necessarily Work In Birmingham.

Unfortunately, many universities approach their tech transfer programs with the goal of licensing their technology to large companies almost exclusively. This arises because university technology transfer offices (TTOs) are often understaffed, and it is easier to license multiple technologies to the same large company under an established partnership than to scout new buyers and negotiate new contracts for each patent. The Bayh-Dole Act, which established the current tech transfer system, was never intended to subsidize the R&D expenditures of our nation’s largest and most profitable companies, nor was it intended to allow incumbents to weaponize IP to repel new market entrants. Yet, that is how it is being used today in practical application.

Universities are not necessarily to blame for the lack of resources, though. Universities spend on average 0.6% of their research expenditures on their tech transfer programs. However, there is a large difference in research expenditures between top universities that can attract over a billion in research funding and the average research university, and thus a large difference in the staffing and support of TTOs. State government funding for the majority of public research universities have been declining since 2008, though there has been a slight upswing since the pandemic, while R&D funding at top universities continues to increase. Only a small minority of TTOs bring in enough income from licensing in order to be self-sustaining, often from a single “blockbuster” patent, while the majority operate at a loss to the institution.

To successfully develop innovation capacity in ecosystems around the country through increased commercialization activity, one must recognize that communities have dramatically different levels of resources dedicated to these activities, and thus, “best practices” developed at leading universities are seldom replicable in smaller markets.

Principle 4: Successful Commercialization Pipelines Include Interventions At The Individual, Institutional, And Ecosystem Level.

As we’ve discussed at length in our FAS “systems-thinking” blog series, which includes a post on innovation ecosystems, a systems lens is fundamental to how we see the world. Thinking in terms of systems helps us understand the structural changes that are needed to change the conditions that we see playing out around us every day. When thinking about the structure of commercialization processes, we believe that intervention at various structural levels of a system is necessary to create progres on challenges that seem insurmountable at first—such as changing the cultural expectations of “success” that are so influential in the academic systems. Below we have identified some good practices and programs for supporting commercialization at the individual, institutional, and ecosystem level, with an emphasis on pathways to start-ups and entrepreneurship.

Practices And Programs Targeted At Individuals

University tech transfer programs are often reliant on individuals taking the initiative to register new IP with their TTOs. This requires individuals to be both interested enough in commercialization and knowledgeable enough about the commercialization potential of their research to pursue registration. Universities can encourage faculty to be proactive in pursuing commercialization through recognizing entrepreneurial activities in their hiring, promotion and tenure guidelines and encouraging faculty to use their sabbaticals to pursue entrepreneurial activities. An analog to the latter at national laboratories are Entrepreneurial Leave Programs that allow staff scientists to take a leave of up to three years to start or join a start-up before returning to their position at the national lab.

Faculty and staff scientists are not the only source of IP though; graduate students and postdoctoral researchers produce much of the actual research behind new intellectual property. Whether or not these early-career researchers pursue commercialization activities is correlated with whether they have had research advisors who were engaged in commercialization. For this reason, in 2007, the National Research Foundation of Singapore established a joint research center with the Massachusetts Institute of Technology (MIT) such that by working with entrepreneurial MIT faculty members, researchers at major Singaporean universities would also develop a culture of entrepreneurship. Most universities likely can’t establish programs of this scale, but some type of mentorship program for early-career scientists pre-IP generation can help create a broader culture of translational research and technology transfer. Universities should also actively support graduate students and postdoctoral researchers in putting forward IP to their TTO. Some universities have even gone so far as to create funds to buy back the time of graduate students and postdocs from their labs and direct that time to entrepreneurial activities, such as participating in an iCorps program or conducting primary market research. 

 

Full story: Building Commercialization Capacity in Innovation Ecosystems

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